Fairfax boosts RIM stake

RIM stake raised by Prem Watsa

TORONTO — Canadian value investor Prem Watsa, dubbed the “Warren Buffett of the North,” nearly doubled his stake in embattled BlackBerry maker Research in Motion Ltd to just below 10%, according to a regulatory filing.

The move makes Watsa, the CEO of Canadian insurer Fairfax Financial Holdings Ltd and a RIM board member since January, the largest known shareholder of the Canadian company whose value has tumbled nearly 80% as its share of the smartphone market tumbled over the past year.

Shares of RIM rose 8 cents to $6.94 in early trade on Monday on the Toronto Stock Exchange.

Analysts said the increased investment by Watsa has more to do with his long investment horizon and desire to bring down the cost of his initial investment in RIM than a bet on making a quick buck on a potential takeover of the BlackBerry maker.

“He said that he’s looking to average down (his cost) and their investment horizon is normally three to five years — they are not looking for a quick turnaround,” said Sameet Kanade, an analyst at Northern Securities in Toronto.

LONG-TERM PERSPECTIVE

Speculation about a possible takeover of RIM has ramped up as the share price dropped to just below $7 from nearly $150 several years ago, but Kanade said move by Watsa to increase his stake suggested the investor was looking beyond the short-term fortunes of the mobile email pioneer.

RIM Chief Executive Thorsten Heins has hired bankers to conduct a strategic review that could result in joint ventures, partnerships or even an outright sales of the company. At the same time, Heins has said the main focus was on the long-delayed launch of its next-generation BlackBerry 10 platform, now due early next year.

RIM virtually invented mobile email with its first BlackBerry devices more than a decade ago, but its market share has evaporated as consumers flock to Apple Inc’s iPhone and devices based on Google Inc’s Android system. RIM last month posted its first operating loss in eight years, and it was much deeper than expected. The company also said it was cutting 5,000 jobs, almost a third of its workforce, as it struggles win back its reputation as an industry innovator.

BELOW REPORTING THRESHOLD

Watsa had earlier reported a 5.12% passive holding in Research in Motion as of Jan. 26. The increase announced on Monday keeps him just below the 10% reporting threshold that would force him to disclose any buying or selling of RIM stock.

The 9.9% stake in the BlackBerry maker, representing 51.9 million shares, is valued at about $356.2 million, as of Friday’s closing on the Toronto Stock Exchange.

While he is buying at a lower price than his previous purchases of RIM, Kanade said the stock still has room to fall.

“Is this the rock bottom? We don’t think so, we think it goes lower, but we don’t have $500 million to burn. If you have $500 million to invest and have a three-to-five year investment horizon, maybe this is a play for you,” he said.

REPUTATION AS SHREWD CONTRARIAN

Watsa joined RIM’s board in January as part of a front-office shuffle in which Heins replaced longtime co-CEOs Jim Balsillie and Mike Lazaridis.

As of May 22, Lazaridis was the biggest investor in RIM with a 5.66% stake, according to Thomson Reuters data.

Watsa, an Indian-born Canadian, has built a reputation as a shrewd contrarian investor by moves such as betting against the U.S. housing market in the last decade and reaping billions when the market collapsed, but Kanade said the investment in RIM may not be one that ends up in Watsa’s win column.

“Prem Watsa is known as the Warren Buffett of Canada. But not all of their plays go right — even Warren Buffett is the first one to admit some of his investments have gone wrong,” said Kanade.